Washington’s standoff with New Delhi over Russian crude imports has become a telling measure of the effectiveness and limits of Western sanctions. India has eased back slightly on purchases of Urals barrels, trimming perhaps three to five hundred thousand barrels per day, but the overall message from Prime Minister Narendra Modi’s government has been firm. Cheap Russian oil remains too valuable to give up, and the political mood at home rewards defiance rather than retreat.
For the United States, the dilemma is clear. A threatened rise in tariffs on Indian exports to America would not just squeeze New Delhi. It would also feed directly into US inflation at a time when domestic prices are already a sensitive political issue. Indian refiners are still importing more than one and a half million barrels per day of Russian crude. If those volumes were forced out of the market overnight, replacement barrels would come at a higher cost, pushing up fuel prices worldwide. Punishment for India could quickly turn into pain for American consumers.
Events in Ukraine have only sharpened the tension. Attacks on Russian refineries and ports continue, disrupting product flows and forcing Moscow to ship more crude abroad. The market is already unsettled, and any sudden shift in Indian buying habits risks aggravating the volatility. Washington knows this. The memory of 2022, when emergency stock releases from the Strategic Petroleum Reserve were needed to cool oil prices, still hangs heavy.
Related: India Dismisses U.S. Criticism of Profiteering from Russian Oil Imports
China complicates the picture. As India trims a fraction of its purchases, Chinese buyers appear to have stepped in, though their capacity to absorb further volumes remains a key question mark. Beijing has the advantage of shadow financial channels that allow it to skirt sanctions more easily. India lacks such networks, leaving its refiners more exposed to pressure. The precedent is important: during the previous Trump administration, India halted Iranian imports entirely once secondary sanctions were imposed. That history gives the United States a measure of confidence that firm action could eventually force Modi’s hand.
Critics argue that India has profited handsomely from discounted Russian oil. That is partly true, but it is far from unique. China, Turkey and Brazil have also secured cheaper barrels and products. India’s refiners have not dramatically expanded exports, since domestic demand has risen strongly and absorbed much of the supply. What has changed is the structure of global oil trade. Asian buyers now find themselves in a position to dictate terms, something that would have been unthinkable before the invasion of Ukraine.
The risk for Washington lies in overplaying its hand. Should tariffs and related sanctions be raised further and Indian purchases curtailed sharply, global prices could surge well beyond the $100 mark. Few Western leaders are prepared for that scenario. Meanwhile, Modi and Xi met in late August to improve broader relations, a sign that BRICS nations are only aligning more closely as this saga continues, at least in the oil world.
On the other hand, stepping back would send an equally powerful message: that sanctions on Russian energy have hard limits which Moscow can exploit. The balance between domestic politics, foreign policy and energy security is becoming harder to maintain.
For New Delhi, the calculation is equally fraught. Continued access to cheap crude underpins rapid economic growth and offers a shield against inflationary pressures at home. Yet reliance on Moscow leaves India open to charges of undermining the West’s wider sanctions regime. A modest reduction in volumes seems to be the compromise for now: enough to signal some flexibility, not enough to threaten growth. The trouble is that such half-measures satisfy neither side.
Energy is no longer just a commodity. It is the currency of global power, traded in barrels and measured in diplomatic concessions. India’s stance has highlighted the fragility of Western sanctions, China’s opportunism, and the uncomfortable reality that cheap Russian oil continues to find willing buyers. The next US move will carry consequences far beyond New Delhi. Whether Washington escalates or retreats, the oil market will be shaped not by technical supply balances but by the politics of defiance, nationalism and geopolitical rivalry.
By Neil Crosby via Sparta Commodities
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